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TALES OF HORROR IN INTERNATIONAL TRADE

TALES OF HORROR IN INTERNATIONAL TRADE. Learning from disaster … 6 instructive cases. The Chicken that Ate Switzerland. The issue: what is “chicken”? Young, broilers or fryers Old, stewing chicken What did the chicken experts say? Old birds are “fowl” “Chicken is everything except

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TALES OF HORROR IN INTERNATIONAL TRADE

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  1. TALES OFHORRORININTERNATIONAL TRADE Learning from disaster… 6 instructive cases

  2. The Chicken that Ate Switzerland The issue: what is “chicken”? Young, broilers or fryers Old, stewing chicken What did the chicken experts say? Old birds are “fowl” “Chicken is everything except a goose, a duck and a turkey” Why didn’t the judge apply “trade usage”? Defendants were newcomers Experts disagreed

  3. T h e Q u e s t i o n What advice would you give to traders buying from newcomers to a particular trade?

  4. The answer (s) • Draft the contract very precisely • Avoid dealing with newcomers • Make sure the newcomers are aware of industry practices

  5. NOT Human! • Dolls paid higher duties than toys • Dolls are “human”; “monsters” are toys • The judge took the toys clothes off! • The judge noted that humans generally lack robotic claws or the ability to generate flames • Conclusion: Wolverine isn’t human! • Result: Toy Biz gets a lot of money back from the U.S. X-men case:

  6. European Union case • EU agreed to • quota on toys • representing • “non-human” creatures Mr. Spock Intense international negotiations: an exception was made for teddy bears Toy companies complained this caused job losses and cost them $200 million UK Customs conclusions: Batman and Robin: OK Captain Kirk: OK Mr. Spock: you’re not human!

  7. Question Assuming such a customs decision affected a transaction that had already been signed by exporter and importer: • Under which Incoterms is the exporter at risk? • Under which Incoterms is the importer at risk?

  8. Answers • Exporter at risk: DDP (also DES/DEQ) • Importer at risk: EXW, FAS, FCA, FOB, CFR, CIF, CPT, CIP, DAF, DDU

  9. Attack of the Weevils • Contract for the sale of flour to Bolivia • Terms: FAS Mobile, product of “merchantable quality” • Yecch: flour beetles discovered • Yecch again: flour is fumigated, sold to Bolivian consumers at a discount • Seller: pay us for our buggy flour! • Buyer: you *#&!%$# Americans!

  10. Question The Bolivians won the case. What does this case teach us about how to receive shipments that contain defects?

  11. Answer • Object promptly • Object in writing • Be consistent

  12. Mommy, I dropped my Coke! • Texas Exporter contracts to ship 1755 cases of soft drinks to Kuwaiti importer • While loading: crash…fizz…pop! • Maximum recovery from carrier: • $500 per “package” • But….what’s a package?

  13. Questions • How many silly references does the judge make to soft drinks? • Had he been mixing a little bourbon with his Sprite? • What did we learn about the need for cargo insurance?

  14. Answers • Silly soft drink references: • TEN : “Things go better with Coke”, “Apparently Kuwaitis would like to be Peppers, too”, “a real Teem effort”, “Pepsi Cola hits the Spot – on the Pavement”, “During the Refreshing Pause between arrival of the container and…”, “In the Crush, the cans were damaged”, “The stevedore was in no mood to have a Coke and a smile”, “Things Go Better on appeal”, “The winds of judicial change Schwepped away the $500 shelter”, “Dr Pepper at 10,2 and 1304” • Was judge mixing bourbon and Sprite? • Seems likely

  15. Need for Cargo Insurance? Lesson – if your cargo insurance coverage is not sufficient, you could find yourself having to pursue the carrier. Be precise about: - where the coverage begins and ends - time when it begins and ends - coverage of war risks, strikes, etc.

  16. The Case that drove me Nuts • Indian sellers contract to ship 1400 tons of “Coromandel Groundnuts” to Danish buyers, payment by L/C • The Danish banks refused to pay the L/C because the Indians got theirnuts mixed up (I mean, they were not consistent in using the term “Coromandel groundnuts”)

  17. Questions • Why did the Danish buyers refuse to authorize payment under the credit? • Who loses in this case? • What does the judge think of the folks in Mincing Lane?

  18. Answer • Why did the Danish refuse to accept the nuts? I think the Germans had something to do with it…

  19. Answer Who loses? -- The Indians: twice – they shipped the nuts, never got paid Mincing Lane (nut experts)? -- Bankers can’t be expected to know everything about nuts!

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